Washington, DC: The Executive Board of the International Monetary Fund (IMF) today completed the mid-term review of Peru’s qualification under the Flexible Line of Credit (FCL) arrangement. The Board of Directors reaffirmed that Peru’s very strong macroeconomic policies and institutional policy frameworks, strong economic fundamentals and track record continue to justify access to FCL resources.

The two-year agreement was approved on May 28, 2020 for an amount of SDR 8.007 billion (approximately US $ 11 billion or 600 percent of quota). The Peruvian authorities reiterated their intention to consider the arrangement as a precautionary measure.

The FCL was created on March 24, 2009 as part of a major reform of the Fund’s lending framework (see press release No. 09/85). The FCL is designed for crisis prevention purposes as it offers the flexibility to draw on the line of credit at any time during the period of the agreement (one or two years), and subject to a mid-term review in two-year FCL agreements. Disbursements are not staggered or conditional on compliance with political objectives as in traditional IMF-supported programs. This broad initial access, with no permanent conditions, is justified by the very strong track record of countries that qualify for FCL, which gives confidence that their economic policies will remain strong.

Following the Executive Board’s debate on Peru, Mr. Mitsuhiro Furusawa, Deputy Director-General, made the following statement:

“Peru’s very strong macroeconomic policies and institutional policy frameworks and its strong track record of prudent policy settings have supported strong growth and stability in recent years and have helped the country overcome the challenges posed by the COVID pandemic. -19. A strong inflation targeting regime, a credible fiscal framework and low public debt, as well as strong financial sector supervision and regulation have enabled the country to deploy a strong policy response to mitigate the socio-economic impact. pandemic while maintaining strong access to international capital. markets.

“After the worst economic contraction in 30 years, economic activity is expected to rebound this year with the deployment of COVID-19 vaccines and the gradual control of the pandemic. Nevertheless, the economic outlook remains very uncertain. Despite the rapid recovery in some major economies and improving commodity prices, external risks remain high. The flexible line of credit arrangement (FCL), along with large international reserves, low public debt, entrenched inflation and a sound financial system, have provided authorities with valuable insurance in a period of uncertainty and volatility without previous.

“FCL will continue to play an important role in supporting the authorities’ macroeconomic strategy, maintaining market confidence and providing a valuable buffer against tail risks. The authorities intend to continue to treat the arrangement as a precautionary measure and phase out its use as external conditions permit. An appropriate communication strategy will be important to prepare the markets for this stage. “